What the U.N. can learn from Google

On Global Warming

Michael Shellenberger and Ted Nordhaus

Published 4:00 am, Friday, December 21, 2007

Last week's United Nations climate change negotiations in Bali ended with a whimper, not a bang, an "agreement" to postpone negotiations until 2009, when the United States will have a new president, one presumably more committed to action than President Bush. The most dramatic moment came when foreign diplomats loudly booed U.S. representatives. While it is always satisfying to see the Bush administration take a drubbing on climate change, the whole episode distracted attention from the reality that Kyoto has failed for reasons entirely unrelated to the United States.

The truth is that those developed nations that actually ratified Kyoto - including those countries whose diplomats booed the United States - saw their greenhouse-gas emissions go up, not down, by 4 percent from 2000 to 2004. In Germany and Britain, the only two major economies to register reductions, emissions fell due to factors having nothing to do with Kyoto or global warming. Margaret Thatcher broke the coal miners' union, moving Britain to cleaner burning natural gas, and the East German economy collapsed after the fall of communism, reducing a reunified Germany's reliance on dirty coal plants. When you remove Germany and Britain from the calculation, European emissions rose 10 percent between 1990 and 2005.

Given this, the failure of Kyoto signers to meet their emissions targets cannot be placed at the feet of the Bush administration. Nor are they the result of miscalculations by policymakers. Europe hasn't reduced its emissions for the same reason that China and India steadfastly refuse mandatory limits: Policymakers in those countries fear the backlash that will result from higher energy prices and slower economic growth. While China is increasingly taking steps to improve energy conservation and efficiency, doing so is consistent with its objective to lower, not increase, energy costs.

This same dynamic will soon play out in the United States. The Senate is considering legislation to cap and auction greenhouse gas permits, thereby establishing a cost for polluting carbon. But lawmakers will face the same challenge of lawmakers in Europe: If you increase energy prices too much, then you'll face a public backlash; if you increase them too little, then you won't reduce emissions. This is the heart of the problem with Kyoto. For any regulatory approach to work, the price of dirty energy must increase enough so that what is currently more expensive clean energy alternatives become cost-competitive.

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There is a better way. Instead of making clean energy relatively cheaper, a new, post-Kyoto agreement should instead focus on making clean energy absolutely cheaper. The model we should follow comes not from past efforts dealing with past pollution problems, like acid rain and the ozone hole, but rather from past investments in technology innovation and infrastructure. Silicon Valley, we often forget, was largely built on U.S. government contracts. In the 1950s, the Pentagon guaranteed the market for computer microchips, driving the cost of a single microchip down from $1,000 to $20 in less than a decade. The precursor to the Internet was literally invented in a Defense Department lab.

Today, Silicon Valley venture capitalists and entrepreneurs are stepping up to the challenge. Just last month, Google announced a "Renewable Energy Cheaper than Coal" initiative to invest hundreds of millions into wind and solar power. But achieving this objective requires a global investment in the hundreds of billions, not millions. Today solar provides less than 1 percent of the world's energy, according to the International Energy Agency. But what would happen if Europe and the United States guaranteed the market for silicon solar panels just like we did with silicon microchips? We know that for every doubling of production of solar panels, price drops 20 percent. Experts say it would cost $50 billion to $200 billion to make solar as cheap as coal.

Solar and wind are just part of the solution. What's needed is a portfolio of investments jointly made by the world's wealthiest countries. The United States, Europe, Canada, Australia and Japan should create a 10-year, $1 trillion energy fund to invest in a range of technologies, many of which (like solar) would be manufactured in China. The prospect of billions of new investment might be enough for China to agree to some emissions limits or even a carbon tax. Together, this new clean energy bloc could drive the commercialization of cheap clean energy technologies throughout the global economy.

We have wasted more than 10 years now pursuing regulation-centered solutions like Kyoto that cannot work. It's time to create a new global agreement, one that aligns economic and ecological interests and appeals to the aspirations of both developed and developing nations alike.

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